An Observer investigation has found at least 1,700 instances in which payday loan companies in Texas have filed criminal complaints against customers in San Antonio, Houston and Amarillo. In at least a few cases, people have ended up in jail because they owed money to a payday loan company. Even when customers avoided jail, the Observer has found, payday loan companies have used Texas courts and prosecutors as de facto collection agencies.

This is despite state laws that forbid payday loan companies from even threatening to pursue criminal charges against their customers, except in unusual circumstances. The law specifically prohibits theft charges when a post-dated check is involved. (Most payday loans require borrowers to provide a post-dated check or debit authorization to get the money.) The state Office of Consumer Credit Commissioner has advised the payday loan industry that "criminal charges may be pursued only in very limited situations" where it can be proven that a borrower knew a check would bounce.

Bad debts are supposed to be handled through civil processes, debt collection agencies or lawsuits. It's the American way. Yet at least some payday lenders -- Wilder singles out The Money Center in San Antonio, and Cash Biz near Houston -- have managed to persuade district attorneys' offices to take their cases.

The question is why. The answer, as always, is money. As Grits for Breakfast explains, if prosecutors treat unpaid payday loans as hot checks, their office gets to keep the cash that's collected.

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Like asset forfeiture, hot check collection produces a slush fund that elected prosecutors can use however they want. According to a TDCAA primer on the subject from 2008, "The statute gives the elected prosecutor sole discretion over expenditures from the hot check fund; the elected is not required to get approval from the commissioners court to use the funds." So there's a tacit economic incentive for prosecutors to look the other way when payday lenders attempt to use them for purposes of debt collection. It helps them grow their slush fund.

Over time, prosecutors have successfully lobbied to use hot-check funds for just about anything (except supplementing the pay of elected prosecutors themselves). "Originally, the Legislature envisioned the money would be used to defray the costs directly attributable to the prosecution of hot check writers, but the spending guidelines have expanded over the years," according to the TDCAA primer. Further, TDCAA emphasizes that, "if a defendant has written several hot checks, there is nothing to prohibit you from collecting a fee on each check." So in aggregate, hot check fees can rack up pretty quickly.